Buying 'Tax Losses'
Buying 'Tax Losses'
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Sm1987

Original Poster:

24 posts

57 months

Wednesday 12th January 2022
quotequote all
Hey all,

Over the years, I've often heard people speaking about buying companies who have 'tax losses' on their books which can be carried forward.

I haven't heard too much about this apart from occasional conversations and curious about these. Is there a market for these kind of companies? What is the value for each £1 of losses which have been incurred. Legal to do?

Curiosity if anything and a Google search doesn't bring up much. Anyone enlightened on these?

Fat hippo

739 posts

150 months

Wednesday 12th January 2022
quotequote all
As I understand it, there are restrictions for exactly this reason.
Changes of ownership and changes in business deny the use of losses.

I’d suggest speaking to a qualified tax advisor.

Eric Mc

124,048 posts

281 months

Thursday 13th January 2022
quotequote all
Trading losses can be carried forward by a business for offset against future profits "from the same trade".

When a business is purchased by a new owner, it is generally considered that the old trade has ceased and a new trade has begun. That means the old losses cannot be offset in future years as the old trade has ceased.

Sm1987

Original Poster:

24 posts

57 months

Thursday 13th January 2022
quotequote all
Thanks guys,

Makes sense. It might be that the legality of this is different abroad.

skwdenyer

18,410 posts

256 months

Saturday 15th January 2022
quotequote all
Eric Mc said:
Trading losses can be carried forward by a business for offset against future profits "from the same trade".

When a business is purchased by a new owner, it is generally considered that the old trade has ceased and a new trade has begun. That means the old losses cannot be offset in future years as the old trade has ceased.
This may help: https://www.cronertaxwise.com/community/my-vip-tax...

db10

289 posts

279 months

Saturday 15th January 2022
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The change of ownership rules state that losses can be used against profits of the same trade. So you couldn’t buy a car dealership and then open a bakery and offset profits of the bakery against the historical losses of the car dealership


db10

289 posts

279 months

Saturday 15th January 2022
quotequote all
Eric Mc said:
Trading losses can be carried forward by a business for offset against future profits "from the same trade".

When a business is purchased by a new owner, it is generally considered that the old trade has ceased and a new trade has begun. That means the old losses cannot be offset in future years as the old trade has ceased.
Not sure where you get your last para from. If the trade remains the same the change of ownership dosent trigger any restriction.

I have advised clients on many occasions on using losses in an acquired company.

Alpinestars

13,954 posts

260 months

Saturday 15th January 2022
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db10 said:
Eric Mc said:
Trading losses can be carried forward by a business for offset against future profits "from the same trade".

When a business is purchased by a new owner, it is generally considered that the old trade has ceased and a new trade has begun. That means the old losses cannot be offset in future years as the old trade has ceased.
Not sure where you get your last para from. If the trade remains the same the change of ownership dosent trigger any restriction.

I have advised clients on many occasions on using losses in an acquired company.
Yes. But you’re both a bit at cross purposes. When a business is transferred it infers that shares don’t change hands. BUT, in such cases losses are transferred to the successor and can be offset against (broadly) future profits of that trade - subject to relevant liabilities anti avoidance. There is no automatic cessation of the previous trade.

Where shares are sold, a change in ownership doesn’t result in forfeiture of losses so long as the nature or conduct of the trade does not change within prescribed periods.

db10

289 posts

279 months

Saturday 15th January 2022
quotequote all
Precisely. The original question referred to “buying companies” ie shares so I’m not sure why a trade and asset/loss streaming comment is relevant. I think it confuses the answer for the OP